Model Options for Mandatory Old-Age Annuities

Abstract

At first glance, the past few decades of the life insurance market in Hungary (and probably in the majority of the European, or at least Central-Eastern European countries) give the impression that annuity insurance is a marginal product that is not worthy of special attention, since most people (with the exception of a few specific groups such as disabled miners) clearly do not tend to purchase such products. A completely different view unfolds, however, if the onlooker regards not the past, but the possible future. It is highly probable that within a decade annuity insurance can move from being a marginal product to a distinctly leading product within the Central-European region. 1 2 Considering the importance and complexity of the phenomenon, one can hardly find literature dealing with the subject and this is especially true in the case of Hungarian language publications3; we can, however, witness a gradual change within the past few years concerning literature in English. Accordingly, the exploration of the specific features of how annuities operate, the impact of the different factors, the resulting hazards for service providers, consumers and regulators, as well as the exploration of means of protection against these hazards, is important. A separate, important question is what needs to be regulated and what it is worth regulating, and how coherent regulation may be achieved. Due to the complicated inherences there is a major risk of ending up with bad, voluntarist solutions and this should avoided at all costs. I hope that my book contributes to the abovementioned